Thursday, 7 September 2017

EY REPORT ON MUSKRAT FALLS MOSTLY A BIG MISS

When it
comes to auditing the risks and shortcomings of the Muskrat Falls project, and
the incompetence of Nalcor, EY is no Liberty Consulting Group.

Plain-speaking
Liberty, employed by the PUB to analyse the cause of the breakdown in service
during DarkNL, persistently offered a clear narrative of what reforms might effect
change.

In contrast,
EY’s prescription for Muskrat is so couched in practised opacity and bathed in bureaucratization
that often only the innocuous is illuminated. The Muskrat Falls Report entitled
"Assessment of Implementation of EY Interim Report recommendations"is
essentially a document for politicians to point towards. It is strong on neither
engineering nor cost-accounting.

A gullible
Minister of Natural Resources dwells on what can only be insincere approvals by
EY about the effectiveness of the Nalcor Board and the Oversight Committee —
which can’t write a publishable Report, none having been written since March
and few before that date.

Nalcor’s management
change — involving VP Gilbert Bennett, following the appointment of Stan
Marshall and the disclosure of both egregious cost overruns and the two-year
slippage of the schedule for the powerhouse — is given the exalted status of
“bifurcation of the project”.

EY’s
flourish even expresses concern for unused contingency funds — as if the
project might suddenly be threatened by an act of prudence!

This is the kind
of fluff that is perfectly suited to Minister Coady who, reporters noted, finds
the Report “reassuring”.

In its 2016
Interim Report EY stated that, "The Review has been based on data and
information provided by Nalcor. EY has not sought to independently verify this
data. EY has had access to the Nalcor team; we have not had direct access to
contractors. EY has not conducted any engineering review, physical inspection or
validation of construction process." (p.7)

In all of
these areas, nothing has changed about EY’s approach to the Muskrat Falls
review.

Had EY bean
counters taken up kayaking, they might have observed far more than they gleaned
from document retrieval.

A recent trip
by this blogger down the Churchill River exposed multiple new shiny trucks for
an archaeological crew and a $1,900/hour (+ gas) helicopter on stand-by that
could have easily been substituted with a boat and motor for a brief (almost) flat
water trip upstream. Where is the
concern for cost?

The same
trip exposed water-ponding at the North Spur, engineering and inspections
having failed to notice the need for additional basic culverting.

Sandy
hillsides exposed deep grooves over a wide area where, having been shorn of trees
and ground cover, erosion by rain water was already strikingly evident.

Imagine what
a good inspection of the whole project might have yielded!

The inadequacy
of an already revised maintenance and operating budget was my first thought.

Worrisome,
too, is the possibility that Nalcor helped write the EY narrative or at least
influenced key parts of its content.

Nowhere is
this deference more evident than in EY’s assertion of three additional risks
for which it notes there is no contingency allowance. EY says the risks are:

1.Significant protest unrest

2.Vegetation and soil removal

3.Other unforeseen directives from
government

Those issues
could only have come out the mouths of Stan Marshall and Gil Bennett.

Significant
protest is indeed a risk, though its impact to date — compared, say, to an
ill-suited crony-based management team, with almost no civil works megaproject
expertise — hardly even registers on the $12.7 billion estimated project cost.

On the other
hand, risks #2 and #3 cited above, are not risks at all in the context given by
EY. They simply constitute public policy choices.

EY had no
business giving “soil removal” or “unforeseen directives” the characterization
of risk — regardless of the ineptitude with which Nalcor perceives the Premier.
As such, they are completely within the domain of the provincial government. Put
differently, Nalcor was not elected, nor is it fit to be in the public policy
making business.

The Natural
Resources Minister didn’t publicly correct EY’s error, but she parrots the firm’s
lines anyway and the mainstream media quotes them. Their job is done.

Still, the
utility of EY’s meagre analysis is represented by the warning that “the Project
retains a high level of inherent risk”. The firm states that this is the case
as it proceeds towards the execution of “a series of complex and significant
activities” which will command a “high planned spend rate”.

The firm
cites as examples construction at the North and South Dams, continuing power
plant installation, turbine and generator installation, HVdc commissioning, and
the approaching winter.

EY makes
recommendations for better project controls in the face of those risks
principally with respect to periodic “probabilistic schedule modelling” using Monte
Carlo or similar risk assessment methodologies commonly used in the engineering
profession. It also wants the Government to implement “an enhanced independent
assurance function… related to cost, schedule, and associated risks”.

Looming too,
but only specifically mentioned in EY’s first Report, are those Chinese-made
turbines and generators whose successful function awaits announcement only
after every dime has been spent.

EY’s recommendations
may make sense, except that they are inadequate. And this is where the
engineering deficit of EY is horribly exposed.

EY needed to
instruct Nalcor as to the virtues of making fundamental management changes in
anticipation of the growing amount of complex work and a crowded schedule.

EY states that,
since bifurcation of Gil Bennett’s original job, “management bandwidth
available to the Project [has] improved the depth and rigour of the project
controls function”. This is hardly a ringing endorsement of management’s
skill-set — especially at this late date.

In that same
context, EY must know that the completions contract for the powerhouse will
involve up to three years of tedious work — much of it within a confined area.
The work will require a level of technical management expertise that Nalcor
does not now possess.

All that
said, that “EY did not conduct any engineering review, physical inspection or
validation of construction process” is surely one of the indictments of this Report.
Evidently no lessons have been learned from New Brunswick’s Mactaquac Dam,
where faulty concrete has that province contemplating demolition after only 45
years of production.

Unsettling,
too, is that EY was not given a mandate to confirm Nalcor’s forecast cost and
completion dates for the project:

And EY makes
no mention of either the North Spur stability problem or the continued absence
of a water management agreement.

While the remaining
“high level of inherent risk”, to which EY refers, needs greater analysis (which
will be addressed in a later post), there are few (knowledgeable) engineers who
believe that the current estimate of $12.7 billion is achievable.

Perhaps none
of those issues matter, anyway. At this level of project cost, apart from the
integrity of the North Spur, the only real issue is whether the sanction of the
Muskrat Falls project was underpinned by criminal fraud.

‘Can’t be
stopped’ is Dwight Ball’s and Stan Marshall’s unproven assertion about the
project — to which they will brook no opposition.

36 comments:

No doubt about it the long awaited EY report is nothing but copious quantities of manure with the shit kicked out of it, total rubbish and nonsense. And it only cost $2 million, was it? The water management agreement is not a risk but a certainty. There is no agreement with HQ on it and therefore the river will flow to the tune called by HQ.As you say, the real risks to the project and its completion are enormous. The sad part is that neither the provincial government, Nalcor nor most of the people understand these risks.

Wow! What a realistic critique of the ey report, so different from Cody's and balls assessment. But no surprise as the government officials were always impressed with the word NALCOR and their expertise from day one. And that s what got us in this mess, blind trust by minister after minister. as I recall wher minister Dally at the time said he don't read reports he depends on nLcor to do that And inform him, yea, the cart before the horse, and has been business as usual from the beginning. And Cathy telling us baloney like NALCOR was staffed by world class expertise, how the hell would she know thAt, except NALCOR telling her that. But guess self praise is better than no praise, and Ey is cut from the same cloth, they only know what NALCOR dummies tell them, and make no attempt to go beyond their nose. Why do I call them dummies. Am sure there are better words to describe them, but when the cost goes fro 6$ billion to over 12$ billion, and climbing and years behind schedule what other names do they deserve, they have earned toes names based on their performance and lies. if they were world class their results would be different. Call a spade a spade ball boy. and Cody too if she knew the difference, but what more can you expect from parrots, like Cathy and all the other ministers of natural resources. I may have to start throwing up too...yes just the taught of 15$ billion and their abuse of the public treasury should cause everyone of us to throw up or stand up. Enough is enough.

World class experts - ah that explains why an oil and gas man and Gill the Cable guy were the top 2 Executives and why the BoD only had 5/13 seats filled, because of their overwhelming expertise in hydro and large scale construction. Nalcor BoD once had a beer distributor on it..

Will an inquiry into MF force the Gov at the time to release its shortlist for Nalcor CEO (if there was one)?

Living right here in the lower part of Happy Valley Labrador not very far from the actual physical river {100 yards or less} and downstream from the Dam at Muskrat Falls. Walking a dog every day up and down the riverside & to the river for a drink of fresh river water in a couple of different places I have a very good idea of the fluctuation in river water level. During the past few days the water level has been steadily going down which means Nalcor is holding back the water upriver again. The lying bastards said that they would do more clearing of the trees stumps and topsoil to lessen the mercury leaching from the flooded riverbanks. Another concern of mine is the complete stopping of fish namely Atlantic Salmon Trout Smelts Whitefish Northern Pike Bur-bot Bottle-fish chussies etc. any and all species of fish are being stopped dead-ended is a terrible man made disaster of a once sustainable source of healthy foodfish for untold generations. I just can not understand the logic in this whole economic environmental dangerous mess. No fish ladder for the fishes and no siren warning system for us the people living in the known flood zone below a clay silt and sand dam is somewhat worrying to say the least.

Edward, I wonder too of the intended mode of operation for power generation: a average output of about 550 MW but maximum of 824MW. This maximum water flow and generation would be needed for cold snap condition on the Avalon, to -13C and colder when cheap inefficient baseboard heaters are maxed out. This required a large water flow increase at Muskrat, that can only be sustained for a few days. But what does this do to the river downstream, might if flood the surface, or cause thicker ice to form over the winter leading to more Mud Lake type flood situations........I fear the variation of volume of water flow to warm the back sides of residents here on the Avalon may risk severe consequences for that river water elevation downstream, that may or may not be known or expected by Nalcor, but the risk not acknowledged to the people who live by that river. Wonder if the present study of the Mud Lake flood of May 2017 will address that. Winston Adams

NALCOR is the real power house in nl and calls the shots they have infiltrated every aspect of government and powers to be in the province by stacking all boards, authorities etc. the elected officials are merely cow toes to NALCOR , or red or green, blue or orange or purple, whatever. It's about time the due ly elected government by the people took charge and become responsible to the people. Cause the rule from those that have influence as was the case in the 17th. And 18th century where the merchant and fishing admirals ruled the masses. I thought we had escaped that form of slavery and government, but it is still alive and flourishing. For Gods sake Ball and elected members take charge and do the job you were elected to do by the people.

This is an excellent analysis of the vacuous EY study that amounted to a scripted reassurance to a government in trouble. No meaningful risk analysis took place.

Uncle Gnarley also placed justifiable scorn on the "Oversight Committee" that do no oversight and can't even muster a report. Easier to cover ones ass when the shit hits the fan when there is no evidence, must be the philosophy.

The question remains who will shake the Government and slumbering media sycophants from their "alternate fact" based reality?

Do the EY Report list the province's net debt as a risk? We are guaranteed 7.9B... with a cost estimate of 12.7B. Old math totals that up to be 4.8B short... and that's if nothing else goes wrong, like say a protest... or, dam failure. Or even more mismanagement. Maybe EY interviewed Premier Ball and found he plans to mitigate rates and subsidize project costs with more diversified economics similar to the great gas tax hike, the live-here-levy, and the library letdown. Maybe the new math (Danny's) tells a different story. Danny says this is a great project that will make money. I don't know. Maybe there is nothing to worry about. Or, maybe Danny wants his lots to sell before an audit/inquiry when he'll be unable to show his face, even in his own little town.

Premier Ball, you must be good at math, adding and subtracting pills for years must've been good practice. Can you let us know where the 4.8B (+) is coming from. Can you publicly state expected power costs at 12.7, 13.7 and 14.7B. Maybe have your agency do up and neat infographic so we can judge world-class.

But, are we all just wailing in the wilderness?If a man speaks in the woods and there is no woman present, is he still wrong? is an old joke but applicable here. If we all speak in the woods and we are right butno one is listening, what does that get us?

Inevitability and the ignorance of obfuscation can be co-opted by a civil disobedience such as the simple act of not paying your light bills for a 60 or 90 days period; by refusing to pay more than the 2016 rate.

The only way to get them to wake up is to refuse to play their game.But, hearken, we have to be all of one mind, a 500,000 unit movement that will stubbornly refuse for as long as it takes. I know, that is as unlikely as anything else to work, but we have to try something, soon.It is better to have tried and failed than to not have tried at all.

Let's call the movement "something genuine, like a mark in a toilet", to quote ee cummings, who ended that particular poem about starting a magazine or newspaper paper, with the lines "Graced with guts and gutted with grace, squeeze your nuts and open your face".

I only hope that Uncle and the rest of us can get past this hurdle to engage in civil disobedience that might or might not save us.

Here is how you do it..you have to hit NALCOR. First convince the public service unions and their leaders that the reason there will be no pay raises is that NALCOR stole their pay raises. Then they will set up roadblocks on Columbus drive and shut down their shop, they can't get to work. Ball and all will then fall in line.

The comparison between EY and plain speaking Liberty Consulting is very appropriate, and is an example of world class and no class. As I recall Liberty` last report, there was subtle suggestion whether Muskrat should proceed or be halted,after having highlighted the ongoing risks and the fact that Holyrood will still be needed due to questionable reliability of MF power. Liberty`s mandate was not to to an analysis of the benefit of whether to complete MF or shut it down, but as I read it, there was suggestion it required an evaluation. This was ignored.......proof that the culture at Nalcor had not fundamentally changed. As to civil disobedience or serious protests........once all our money is spent by Nalcor, and the bills arrive, then there will be protests. no one protested knowing at sanction that rates would jump about 60 percent, and shock rates defined as exceeding 10 percent. But let gas go up 5 percent and everyone panics, and long line ups to save 5 dollars before the hike. Perhaps it is the time factor.......gas hikes kick in quick, whereas Muskrat is a decade old project, and few ordinary people see or worry about the impact. Only this past two months on this blog has there been suggestion of not paying shock rates that are soon coming. How many worry about a hurricane when it is a 1000 miles away....Nflders book holidays right in it`s path, hoping the path will change, in defiance of some 70 computer models all mostly in agreement on the result. For MF, build on false and fake assumptions, and managed by fake world class competence, including the latest EY report and Oversight Committee, it seems we are soon to reap the whirlwind. Winston Adams

God vs Trump:Obviously God is getting pissed off with the climate change deniers, especially Trump. Not unlike the plagues cast on Egypt and the Pharoah,for his evil ways, and whose heart hardened against God. CBC reports that today Trump`s tone has changed as IRMA approaches. Last week our Gnynne Dyer wrote that Trump won`t admit the reality of climate change , unless maybe Miami gets hit! And so it appears Dyer and God were on the same wave length. I have heard some say they hope Trump`s Winter White House in Florda gets a direct hit. Now any one with common sense knows airplanes use large volumes of fuel, making climate change worse and storms like IRMA more destructive. Yet what was Trump up to yesterday: announcing that Kuait will be buying more military and commercial aircraft, which is great according to Trump. Aircraft do not not run on windmill or solar energy. As Harvey approached he announced the pardon his Shriff Joe buddy, who illegally targeted people of Spanish decent in Arizona. Trump say s he has a big heart, but like the Tin man in the Wizzard of Os, he has no heart. Observe his actions, not what he says. When will Trump say UNCLE and admit that the USA must seriously tackle climate change , that time is running out.....God is pissed off....he has allowed the best climate scientists present this data for some 50 years, and yet, we continue, worldwide, to increase the fossil fuel emissions. Who could blame God for being upset with those created in his image. Idiots running the show on this planet........not unlike those at Nalcor. And just for a small show of fire and fury, why not toss in a 8.1 earthquate off Mexico, knocking out power to 1 million, as 3 hurricanes now follow up on Harvey. He, the big man up there,(usually pictured with a beard) ain`t shittin around no more. We`ll see who`s boss. Even the mayor of Miami calls this a `nuclear hurricane`. Did someone say our Minister Coady is in Scotland wanting more oil projects to proceed. And Fortis staff gone off to the Turks island (18 now killed by IRMA) where they operate plants that spew CO2! Oh my, what a mess we have created. God`s infinite patience is being tested. Fortis boss Perry says Nfld should go slow on climate change mitigation. Let us pray that both Trump and Perry will soon see the LIGHT. For those that don`t pray........write a letter to the Telegram, maybe, or our Environment Minister. At least IRMA didn`t turn toward Nfld. One person suggested our prayers were stronger than those from the US of A. Who knows. PF

Bruno, you may have been aware that an electromagnetic pulse was emitted from the sun just prior to the 8.1 earthquake, heading for earth. Dr Evil of North Korea suggests he can create an electromagnetic pulse, and of course the USA and Russia etc can also,from nuclear blasts, but these are minor in comparison. Lightning bolts are low tech for Mother Nature, and Trump wears his yellow protective halo, and can even squint at the sun for half a second. His brain has a low level electrical activity, as all humans do, but his has a few wires crossed, with neurons misfiring, so he might self destruct, before he pushes that red button. Stay tuned. Will he see the LIGHT........he made a deal with the democrats yesterday........who knows for sure what evil lurks in the shadows. I expect even you must wonder if Mother Nature is enacting retribution, with so much environmental destruction by mankind.PF

This mess called Muskrat falls represents the failure of democracy and it is more common than we think. We have seen this occur over and over again whereby politicians seeking election promise the moon and the voters elect them. After obtaining power elected leaders fall into this bunker of secret spending, unobtainable economic forecasts, projects that are costly and not needed and lying and deceit to cover their tracks. We have had several politicians with these goals from Smallwood t peckford to Williams all of which have taken the same path and all have completed the same mistakes. We may have to reform our democratic institutions soon or it will be our own destruction

Anom at 06:38 I would have to agree with you on your post. The democratic process has become a failure in more than one ways and unless a revolution is started to eliminate what I call "Elected Dictators" we could see elected governments suffer the same faith as communism did in the 1990's. It has happened here in NL where a pet project by a populace premier has enslaved generations to an over bearing tax or electrical rate to pay for the excess costs, in the US where a leader was chosen not by the majority but by a system designed in 1770's to protect the institution of slavery or in the Philippines where a brutal dictator is using fake news and hyped up drug wars to eliminate his opponents. The introduction of the internet and social media is not the cause but rather the symptom that was always there but never came to the forefront. How we are going to fix this global mess and thus all the other associated problems is the next big question facing humanity.

Nothing new in Mcleods article, infact he was informed of this almost 2 yrs ago---all this info was available in Atippa releases dating back to Summer of 2016. Again The Telgram and other mainstream media are back reporting something made public a long time ago to try and save face.

I would offer that it is common in large project work---same practice (ie body shop or recruiting agency) was used for Hebron.

Whether it was implemented in a sound fashion I cant comment on---its my first experience in this type of employment scenario so I have no basis for comparison. I would offer that if my services were sourced from a consulting company (ie Stantec/AMEC/SNC etc); that by chargeable rate to the client would be higher, so it is probably a cheaper way for Nalcor to ramp up 500 professionals for 5yrs +/- without taking on the liability of benefits or long term employment contracts with payouts.

In the end, no matter where the manpower comes from, a complete lack of oversight (and ability to execute a MF) by Nalcor corporate is for sure; even if under some analysis MF was justifiable..

Todays Telegram editorial :NL facing population shrinkage.It cites a MUN Harris report of 41,000 fewer people by 2036.The editorial , by Russell, I assume, says Muskrat Falls projections showed needing 25 percent more power by 2035, but likely we`ll have 8 percent fewer power customers, so higher power costs for everyone. I recall a detailed comprehensive submission by JM to the PUB,in 2012, at odds with Nalcor projectins, which included figures with consideration of declining population. Why has MUN taken 5 more years to report on this, and the Telegram only now seeing the impact for MF and power rates. Why did the Telegram not comment on the JM analysis years ago. His analysis was posted with even more detail on Ed Holletts blog, (Sir Robert Bond Papers) and some on this blog. Seems the Telegram, for the most part,accepted the gospel of Saint Martin, and did no investigative journalism to verify the arguments of the MF critics. 5 years to now see and comment on some of the false assumptions is shameful.. The Harris Centre is MUN.........was such demographics considered by Wade Locke........... What does this say about MUN`s share of the responsibility of this MF fiasco. Tip of the iceberg, likely, how MUN has enabled the boondoggle. Russell or someone at the Telegram should do a piece titled `How MUN enabled the Boondoggle`.......demographics being just one issue. At least Pam suggested a possible boondoggle in 2012, 4 years before Stan Marshall used the term.Winston Adams

Winston, NL is not only only facing a population shrinkage its politicians are to a man and woman suffering from a gonad shrinkage.

I questioned the rosy population projections at the JRP and pointed out that NL had the only utility in North America that was projecting increased demand. Asked to reconcile these facts Gil Bennett smugly said he knew best and was confident in the inflated demand curve.

Do you feel confident with Gil remaining at the helm still beyond any accountability for his actions?

I had two encounters with Gil:At a Holiday promotion for MF, I took him to be intelligent, knew about ducted heatpumps that while they save energy, they rely on backup resistance heaters when cold, so no advantage for peak load savings during cold snaps.However, he knew nothing of minisplit heatpumps which are much superior and offer large demand reductions when cold, and very cost effective..........and these were on the market for a long long time, NS then installing 20,000 a year by 2011. At a PUB hearing, I noticed him present and studying my presentation document and charts as to what they could do........he asked not a single question nor contradicted my analysis. Seems Gil knows best, for everything, even quick clay issues. But Stan Marshall seems to have silenced him. Gil once boasted that the rock excavations for MF was as great as that for the great pyramid in Eqypt. We can now say the MF debt is even bigger, and the island demand for MF power, getting so small, may disappear altogether.Yet he got a 57,000.00 bonus this year!Seems it necessary to overlook past false assumptions. I wonder if Fortis would hire him.......for Gull Island. And I hear Hydro Quebec is anxious to hire him. A cable guy they say......with no experience to justify his position. WA

It takes Congress in the US to approve a $15B expenditure for FEMA hurricane relief yet here in tiny NL we have inept and unscruptulous former and current politicians (everyone knows who they are)who have pretty well bankrupted us and still have a free reign into the bottomless money vault which you and I and our grandchildren must pay back. They are allowing up to $15B and beyond if necessary, to be spent by incompetent businessmen with no accountability. Hell!! we can't even get an honest answer as to what has happened and who the scumbags are.A Forensic audit MUST be done NOW! Dwight Ball must do the right thing and let the chips fall where they may. Those who have inflicted this disaster on the tiny population of NL must be exposed and dealt with.

Stan is in charge and the project is under control, hell just two billion dollars increase since he took over. Split transmission from generation, eh bye. According to Ms Coady we are in good hands?? I say we need a full blown inquiry and we need it in 2017 and not later, to suit the long shot possibility of the re-election of these liberals.We need to get this thing dwight, right!!

Slightly more than half of Norway residents now prefer to leave some oil in the ground, to counter climate change. Some want to terminate extraction within 15 years. How many Nflders agree with this approach........Winston Adams

Does "management bandwidth available to the Project [has] improved the depth and rigour of the project controls function” actually mean, someone is now paying enough attention to see whether anything is working?

About Des Sullivan

Uncle Gnarley is written by Des Sullivan, of St. John's.
He is a businessman engaged in real estate, retail and development companies.
A Director of Sullivan Capital Corporation, he is a former Executive Assistant to Premier's Frank D. Moores (1975-1979)and Brian Peckford (1979-1985).
He also served as a Part-Time Board Member on the Canada-Newfoundland Labrador Offshore Petroleum Board (C-NLOPB).
Uncle Gnarley permitted the use of his highly regarded name provided he could have full access to state his own rather unequivocable opinions. (A more detailed Profile of Uncle Gnarley is described in the very first Post entitled "Uncle Gnarley is alive and well" found on this site.
Sullivan is a firm advocate of sound fiscal management by the provincial government and intends to use this Site as a forum for commentary on the major issues of the day. Says Sullivan, "Newfoundland and Labrador inspires debate on a variety of issues, a veritable Muskrat Falls of opinion".
Readers are invited to leave their opinions, too.
Uncle Gnarley will post every Monday, and more often as events warrant.